Suppose that the production of penicillin generates pollution of the Columbia River, which is gradually killing a valuable fish population. Among other problems, fishermen in the area are experiencing a decline in their incomes. Suppose that the demand and supply of penicillin is shown in the accompanying graph, where S(MC_private) reflects the private marginal costs of production and S(MC_social) represents the social marginal costs of production. Based on this information, the size of the negative externality from penicillin production is:

a. $65,000.

b. $60,000.

c. 8 tons.

d. $70,000.

e. $10,000.

Transcribed Image Text:

80000 75000 70000 65000 8 60000 55000 50000 45000 Price per ton 4 D(MB) S(MCprivate) 00 -S(MCsocial) 5 6 7 9 10 11 Quantity (tons of penicillin per period) 12